Broadband Lacks a European Audience

Broadband Internet access is being adopted so slowly that GartnerG2 predicts only 10 percent of the households in France, Germany and Britain will have broadband access by 2006. Simply put, the study found consumers are not prepared to pay a premium for broadband.

Consumers are aware that broadband offers faster Internet access, but there is currently no “must have” application to convince the majority of consumers they need broadband, let alone pay for content. According to the survey, fewer than 10 percent of Internet households think broadband currently provides good value.

Without a killer app, consumers are bound to use price as an indicator of whether they want broadband access.

“In the absence of good content, our research shows that consumers are very price-sensitive,” said Adam Daum, vice president and analyst at GartnerG2. “To achieve widespread adoption of broadband, the price needs to fall from its current level of €45 to €60 per month to less than €30.”

GartnerG2’s study found that broadband penetration is lowest in countries where the price is highest. But if telcos lower the price of broadband, they face a high level of cannibalization of current dial-up revenues.

The current opportunities for broadband uncovered by GartnerG2 are either niche or high risk. Telecommuting, which is often cited as a potential broadband market, is still a small market, with only 5 percent of working adults in Britain currently work from home. Even with companies reviewing their security and travel arrangements in light of Sept. 11, there are no clear signs that this is increasing the number of people working from home.

Subject to regulatory approval, European DSL service providers could use their networks to deliver pay TV and telephone services. But this requires significant investment and is also a risky move because it puts DSL providers into head-on competition with digital cable and satellite TV operators.

GartnerG2’s report makes mention of three things that must happen in order to drive broadband adoption across Europe: media companies need to develop attractive applications; consumers need to experience broadband before they commit themselves to regular monthly subscriptions; and the price differential between narrowband and broadband must be significantly reduced. Based on current levels of price-sensitivity, GartnerG2 figures that broadband would have to be offered at below €30 per month to achieve widespread adoption.

GartnerG2 also recommends that businesses continue to optimize Web sites for narrowband access, delay investments in broadband Internet content and use rich media advertising sparingly. Broadband marketing plans, the report found, should be country specific, taking local differences into consideration. For example, in the Netherlands, one-third of households are expected to have broadband by 2005, mostly via cable networks. But Greece will have the lowest broadband penetration in Europe.

Forrester Research also examined the European broadband market and found it far behind the United States. Only 4 percent of online users in Europe have broadband Internet access, according to Forrester’s survey of consumers in 13 European countries.

Forrester expects three types of applications will benefit most from broadband access: media sharing, entertainment information, and what Forrester calls “snacking” activities — short, frequent spells of online activity.

File sharing will see the largest broadband effect, helped by mp3 downloads, software downloads and online games. Broadband’s always-on, call-charge-free model encourages “snacking” communication applications like SMS, chat, instant messaging, newsgroup participation and free email. And broadband facilitates access to entertainment content like magazine and entertainment sites, movie information sites and gambling due to the rich media experience made possible by higher bandwidth.

The U.S. broadband market is quite a different story. According to a survey by Leichtman Research Group Inc. and sponsored by the Broadband Content Delivery Forum, more than 20 percent of individuals with broadband/high-speed Internet access have rated the satisfaction with their service a “10,” as compared with just over 10 percent of those with dial-up access.

The survey of 1,000 online households found that more than 40 percent of households with Internet access are interested in subscribing to high-speed/broadband Internet services. Current broadband households spend 40 percent more time online than those with dial-up connections, and those who are interested in subscribing to broadband services spend 50 percent more time online than those who are not.

“Our survey demonstrates an evolution in the broadband Internet market,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group. “From this data, we are able to see how today’s broadband users are different from other consumers and what will motivate future adoption. The early adopters are a wealthier group who are happy with their service and the speed that it provides, while the next wave of consumers are interested in additional benefits to what they use today.”

Types of Internet Access in Selected Countries
Year-end 2001
France Germany Britain United
Total households 24.8m 37.7m 25.7m 105.0m
Internet Households 4.5m 10.3m 8.8m 63.0m
Broadband households 0.5m 1.0m 0.2m 13.8m
Internet Access
Percent of households 18% 27% 34% 60%
Broadband Access
Percent of all households 2% 3% 1% 13%
Percent of Internet households 8% 9% 2% 22%
Source: GartnerG2

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